Review of the main events of the Forex economic calendar for the next trading week (17.10.2022 – 23.10.2022)
Despite a strong decline on Thursday, the dollar still managed to rectify the situation and end the past week with a minimal growth. Thursday turned out to be extremely volatile. It is possible that the sellers of the dollar suffered losses when its quotes rose sharply immediately after the publication of CPI indices for the United States, but also the buyers, who found themselves in the red if they did not take profits in time when the dollar strengthened sharply.
The US Department of Labor said on Thursday that annual core inflation rose more than expected in September (by +6.6% against the forecast of +6.5% and +6.3% in August). At the same time, headline inflation decreased from +8.3% in the previous month to +8.2%.
Now, with the release of the September CPI, the forecast, according to the CME Group, says there is a 99% chance that the Fed will raise rates by 75 bp in November. This is a strong bullish factor for the dollar.
In the main scenario, we expect its further strengthening and the growth of the DXY dollar index towards more than 20-year highs near 120.00, 121.00.
Next week, market participants will carefully study the important macro statistics for New Zealand, Australia, China, USA, UK, and Canada.
*) during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, October 17
21:45 NZD CPI (Consumer Price Index) for the 3rd quarter
Consumer Price Index (CPI) is a key indicator for assessing inflation and reflects the dynamics of retail prices for a group of goods and services included in the consumer basket. A positive result strengthens the NZD, a negative result weakens it. Previous CPI values (annualized): +7.3% in Q2, +6.9% in Q1 2022, +5.9% in Q4 2021, +4.9 % in Q3 2021, +3.3% in Q2 2021, +1.5% in Q1 2021. A relative decrease in the indicator and a value below the forecast may negatively affect the NZD quotes. Forecast for the 3rd quarter of 2022: +6.6% (annualized).
Tuesday, October 18
00:30 AUD Minutes of the October meeting of the RB of Australia
This document is published two weeks after the meeting and the decision on the interest rate. If the RBA is positive about the state of the labor market in the country, GDP growth rates, and also shows a hawkish attitude towards the inflationary forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The bank’s soft rhetoric regarding first of all inflation puts pressure on the AUD.
During the recent (October) meeting, the RBA raised the interest rate (for the sixth time since November 2010), this time by 0.25%, bringing it to 2.60% in order to contain inflation, which reached a high in 20 years (In the first quarter of 2022, Australian headline annual consumer price inflation was 5.1% and core inflation was 3.7%). In addition, the RBA signaled the likelihood of a further increase in the coming months. Market participants are now pricing in the RBA interest rate hike to 3.0% – 3.1% by the end of this year.
“The Board will do everything necessary to ensure that over time, inflation in Australia returned to the target level – said the head of the central bank Philip Lowe. – This will require further interest rate hikes in the future.”
According to the RBA forecast, in 2022 headline inflation will be at the level of 6%, while core inflation will accelerate to 4.75%. At the same time, the unemployment rate next year may fall to 50-year lows.
“With the move towards full employment and data on prices and wages, some scaling back of the emergency monetary support provided during the pandemic is appropriate,” Lowe said.
However, if the published minutes contain unexpected information regarding RBA monetary policy issues, the volatility in AUD quotes will increase.
02:00 CNY China’s GDP for the 3rd quarter. Retail sales index
The National Bureau of Statistics of China will present data on GDP growth in the 3rd quarter of 2022.
China’s GDP is expected to grow in the 3rd quarter of 2022 by +3.5% (+3.4% yoy) after -2.6% (+0.4% yoy) in the 2nd quarter , +1.3% (+4.8% yoy) in 1Q 2022, +1.6% (+4.0% yoy) in Q4, by +0.2 % (+4.9% yoy) in Q3, +1.3% (+7.9% yoy) in Q2 and +0.6% (+18.3% yoy) in the 1st quarter of 2021.
China is the largest buyer of raw materials and a supplier of a wide range of finished products to the world commodity market. China’s economy is already the largest in the world, according to many sources, pushing the US economy to second place. Therefore, the publication of important macroeconomic indicators from China can have a strong impact on the entire financial market.
The relative decline in GDP may have a negative impact on the yuan quotes, as well as on the quotes of commodity currencies and currencies of the Asia-Pacific region, because it may indicate a slowdown in the growth of the Chinese economy.
The growth of the indicator will have a positive impact on the Chinese yuan, as well as on world stock indices, primarily Asian, as well as on quotations of commodity currencies such as the New Zealand and Australian dollars. China is the largest trade and economic partner of Australia and New Zealand and the buyer of raw materials from these countries.
Therefore, positive macro statistics from China may also have a positive impact on the quotes of these commodity currencies, although the expected data indicate a slowdown in the world’s largest economy, and this is a negative factor for stock markets and commodity currency quotes.
Retail Sales Index is released monthly by China’s National Bureau of Statistics and evaluates the total volume of retail sales and cash generated. The index is often considered an indicator of consumer confidence and economic well-being and reflects the state of the retail sector in the near term. The growth of the index is usually a positive factor for the CNY; a decrease in the indicator will negatively affect the CNY. The previous value of the index (in annual terms) -6.7% (after an increase of +8% in the last months of 2019 and a fall of -20.5% in February 2020).
Outlook: In September 2022, retail sales increased by +3.3% (yoy). The data suggests an uneven pace of recovery after a strong drop in February-March 2020. If the data turns out to be weaker than the forecast or previous values, the CNY may weaken sharply.
Wednesday, October 19
06:00 GBP Consumer Price Index. Core Consumer Price Index
Consumer Price Index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the British consumer basket. The CPI index is a key indicator of inflation. Its publication causes active movement of the pound in the foreign exchange market, as well as of the index of the London Stock Exchange FTSE100.
In the previous reporting month (in August), the growth in consumer inflation amounted to +0.5% (+9.9% in annual terms). The data suggests growing inflationary pressures, which is likely to support the pound. A value of the indicator below the forecast/previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to maintain an easy monetary policy.
Forecast for September: +0.4% (+10.0% in annual terms).
Core Consumer Price Index (Core CPI) is published by the Office for National Statistics and determines the change in prices of a selected basket of goods and services (excluding food and energy) over a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the GBP, a negative result weakens it.
In August, Core CPI (in annual terms) increased by +6.3%. It is likely that the publication of the indicator will have a positive impact on the pound in the short term if its value is higher than the forecast and previous values. The indicator reading below the forecast and/or previous values may provoke a weakening of the pound.
September forecast: +6.4%.
12:30 CAD Core Consumer Price Index in Canada
Core Consumer Price Index (Core CPI) from the Bank of Canada reflects the dynamics of retail prices of the corresponding basket of goods and services (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products). The inflation target for the Bank of Canada is in the range of 1%-3%. The rising CPI is a harbinger of a rate hike and positive for the CAD. Core Consumer Price Index increased in August by 0% (+5.8% in annual terms), in July 2022 by +0.5% (+6.1% in annual terms), in June 2022 by +0.3% (+6.2% in annual terms), by +0.8% (+6.1% in annual terms) in May, by +0.7% (+5.7% in annual terms) in April, in March 2022 by +1.0% (+5.5% in annual terms), in February by +0.8% (+4.8% in annual terms), in January by +0.8% (+4 .3% in annual terms). If the expected data turns out to be worse than the previous values, then this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar.
Thursday, October 20
00:30 AUD Employment rate. Unemployment rate
The employment rate reflects the monthly change in the number of employed Australian citizens. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for the AUD, while a low value is negative. Previous values of the indicator: +33,500 in August, -40,900 in July, +88,400 in June, +60,600 in May, +4,000 in April, +17,900 in March, +77,400 in February, +12,900 in January 2022.
Also at the same time, the Australian Bureau of Statistics will publish a report on the unemployment rate – an indicator that assesses the ratio of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the AUD.
Forecast: Unemployment in Australia remained at its lowest level in September at 3.5% (against 3.5% in August, 3.4% in July, 3.5% in June, 3.9% in May and April, 4 .0% in March and February, 4.2% in January) approaching pre-coronavirus levels, and the employment rate rose by another +50,000 Australian workers.
The RBA officials have repeatedly stated that in addition to the situation in international trade, the Australian economy and the central bank’s monetary policy plans are affected by indicators of the level of debts and household spending, growth in wages of workers, as well as the state of the country’s labor market. If the values of the indicators turn out to be worse than the forecast, then the Australian dollar may decline significantly in the short term. Better-than-expected data will strengthen the AUD in the short term.
01:30 CNY People’s Bank of China Interest Rate Decision
Since May 2012, the People’s Bank of China has been steadily lowering the interest rate, providing support to Chinese manufacturers. The last time the bank lowered the rate was in August 2022 (by 0.1% to 3.65% at the moment).
In 2020, in the context of international trade conflicts and a slowdown in the global economy, the world’s largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitiveness of goods exported from these countries.
The People’s Bank of China is also in line with this process. The depreciation of the yuan has become especially relevant in the last 4-5 years, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative consequences of increased duties on the import of Chinese goods into the United States was the depreciation of the national currency of China. Such a measure was intended, among other things, to maintain the previous volumes of imports of Chinese products to the United States, which would be cheaper for American buyers due to the difference in the exchange rates of the national currencies of the United States and China.
The coronavirus pandemic has become an additional strong negative factor.
Probably, at this meeting, the People’s Bank of China will keep the interest rate at the same level of 3.65%, although unexpected decisions are not ruled out.
If the People’s Bank of China makes unexpected statements or decisions, volatility could increase throughout the financial market. Investors will also be interested in the bank’s assessment of the consequences of the coronavirus for the Chinese economy and its policies in the near future.
Friday, October 21
12:30 CAD Retail Sales Index
Retail Sales Index is published monthly by Statistics Canada and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. The previous value of the index (for July) was -2.5%. If the data for August turns out to be weaker than the forecast and / or the previous value, the CAD may drop sharply in the short term.
Price chart of EURUSD in real time mode
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